Scraps of Paper Be Damned

First, if you hadn’t noticed, gold and silver bullion coins are selling faster than boysenberry funnel cakes at the county fair. January 2013 U.S. Mint bullion sales of the American Eagle 1-ounce gold coin increased 47 percent from January 2012. In addition, American Silver Eagle (1-oz) bullion coins sold by the U.S. Mint rose 22 percent in January 2013 from January 2012.

Second, Olin Corporation, the biggest retail supplier of small-caliber ammunition, enjoyed a jump in pretax earnings at its Winchester unit to $16.5 million during the fourth quarter from $500,000 the year before. By our rough calculation that’s an increase in pretax earnings of 3,300 percent.

Third, the S&P 500 just notched its best January in 16 years. For the month, it increased 4.84 percent. What’s more, about $32 billion flowed into stock based mutual funds.

Here at the Economic Prism we don’t know what record gold and silver coin sales, gun and ammunition sales, and stock market sales have to do with one another. But we think that, perhaps, somehow they are related.

How so?

What follows is an attempt at an explanation…

Broken Promises

“The world was incredibly shocked in 1914 when Bethmann-Hollweg, chancellor of Germany, characterized the treaty guaranteeing the neutrality of Belgium as a ‘scrap of paper,’” remarked author, economist, and professor, Benjamin Anderson, in Economics and the Public Welfare.

“In retrospect,” continued Anderson, “one may say that this was one of the most terrible things that has ever been said. The world is full of scraps of paper today.”

Yes. The world is full of scraps of paper today, indeed. But what do these scraps of paper represent?

In short, they represent broken promises.

The paper, remember, is simply the recorded account of a treaty, contract, or promise. It documents a handshake. When promises are upheld by citizens, businesses, and governments, the paper they are written on has value. It is the law of the land. When broken, the paper is debased and devalued to merely a scrap.

Regrettably, the actions of the U.S. government over the last 100-years have, in essence, debased parts of the Constitution to scraps. Money, for instance, hasn’t been constitutional since the creation of the Federal Reserve on December 23, 1913. This is not hyperbole. It is a fact…

Article I, Section 8 of the Constitution empowers Congress – not the Federal Reserve – to coin money and regulate the value thereof. Moreover, Article I, Section 10, specifies that no State shall emit bills of credit – like Federal Reserve notes – or make any thing but gold and silver coin a tender in payments of debt.

Scraps of Paper Be Damned

Hence, the money you hold in your pocket and in your bank account is unlawful. It represents a broken promise. On top of that, the Federal Reserve’s promise to pay is a promise made with the wink of an eye and fingers crossed behind their back.

These days the Federal Reserve – not Congress – regulates the value of money. The way they’re currently going about it, is through operations of mass money debasement. What we mean is they are trashing the dollar. Just last Friday the dollar fell to a 14-month low against the euro.

This is why gold and silver bullion coins and even stocks are selling at record rates. They are better wealth preserving assets than the scraps of paper entitled Federal Reserve note. Similarly, this is why ammunition is selling at record rates.

However, in addition to having intrinsic, wealth preserving, value, ammunition is also selling at record rates because President Obama, and certain Senators, have taken to trashing Amendment II of the Constitution. This has set off a handgun and ammunition buying mania…store shelves are being cleared of ammunition faster than it can be replaced. Quite frankly, we’ve never seen anything like it.

But unlike money debasement, Americans will resist the debasement of their Amendment II rights. Recall, in 1913, when the Federal Reserve was created, the public trusted the promises of government. They believed their leaders walked upright – not with crooked spines – and that they would never debase money as clever financial gimmickry.

These days, after continually being lied to by politicians and having their noses repeatedly rubbed in the mud by the government, the public trust is gone. It doesn’t matter what gun control laws or acts Congress passes. Americans will resist. Scraps of paper be damned.